Related question to SharePoint 2010 restricted document library contributors. Is it possible to allow contributors to a document library to add documents, edit their own documents, but only read (not edit) documents submitted by others?
Lists can set Item-level permissions in the UI using /_layouts/advsetng.aspx
But document libraries dont have this option in the UI
But you could try setting the same properties from powershell/code
SPList.ReadSecurity = 1
SPList.WriteSecurity = 2